Viewing blog posts written by Jack Stewart


The capitol should be teeming with economists

Posted by Jack Stewart, on Dec. 15, 2008

Is any Californian alarmed that snap judgments without the benefit of professional economic analysis are being made to negotiate the state's budget and economic recovery?

Economic impacts must always take precedent in a state that leads the nation in bold government programs. The unintended consequences of previous policies and budget solutions have exacerbated the current emergency and still we see almost no economists in the Capitol laying out the long and short term effects for the myriad policy debates that make up our budget negotiations. 

Today, CMTA and 25 other employer groups sent a joint letter to the Legislature insisting that economic stimulus must be the third leg of budget negotiations.

With this letter a consortium of employer groups are urging lawmakers to negotiate in good faith to resolve the budget crisis for the good of all Californians. A crucial part of the solution is understanding and building the foundation for a healthy economic recovery -- a dynamic we do not currently enjoy.

Lawmakers must understand that, in the coming months and years, this state will only thrive by growing the industries that create both wealth and high paying jobs -- such as manufacturing.  That will in turn produce robust economic activity and new state revenue.

The state has already lost 25,000 manufacturing jobs through the first ten months of 2008 rounding out an unbelievable loss of a quarter of its industrial workforce since 2001.

California has reached an economic tipping point where current economic activity can no longer produce the revenues needed to sustain state spending.  It is important that legislators focus on how spending cut and tax increases impact jobs and future economic growth.  For example, a sales tax increase would further discourage manufacturing investments. Because, unlike 47 other states, California applies full sales tax on the purchase of capital equipment. Our state's tax burden on business is already 20 percent higher than the rest of the country, along with overall costs that are 23 percent higher.

The coalition is simply asking that economic recovery guide budget decisions and that negotiators fully account for jobs and revenue lost or gained as a result of budget outcomes.

Abbreviated principles are as follows:
  • Sufficient business activity and a growing tax base is critical to reach California's public funding goals.
  • State policy and regulatory regimes for the future must be assessed in terms of their impact on overall economic development.
  • California must become more cost-competitive to retain and grow high wage jobs.



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